In Brazil there is the grey market. This informal
market is made up business entities which evade taxes, skirt
compliance, infringe copyright, disregard safety and environmental
regulations, and produce inferior goods. They account for
40 per cent of gross national income.
If a grey market is allowed to grow here, it will mean that
those workers will have no health benefits, no pension plans,
little leave entitlements and no full time jobs.
Studies indicate that some 55 per cent of the workforce in
Brazil is employed in the informal sector. It is reasonable
to assume that they will retire on welfare or what we call
old age pension. This would happen here if we encourage this
Contract work is a typical example of a sector in which compensation
benefits are minimal, and construction workers are a large
part of this sector locally. There does not appear to have
been academic or statistical studies done locally to determine
the level of compliance, and the effectiveness of the various
insurance policies in place to cover workmens compensation,
contractors all risk and public liability claims, among contractors.
The experience is that there are no health benefits or pension
plans for such workers. The experience, also, is that such
contract workers are in receipt of a relatively large pay
But without trade union support, these same workers are unlikely
to institute any consistent savings plan for retirement, their
childrens education, or even contingencies.
What complicates matters is that many of them work long hours,
through weekends, and have little time for reading or attending
Many of their life insurance policies lapse, often because
they do not have work every month, and many lack the discipline
to ensure minimum balances in bank accounts. So, non payment
of premiums, beyond the grace period, results in loss of the
But these workers need help. I think the bankers have a wonderful
opportunity to help them. Perhaps a bank account that holds
a minimum balance to ensure the salary deductions can be met
over the period of no work is a useful device.
Alternatively, small systematic savings in mutual funds, or
non registered annuities which allow access to periodic disbursements,
will go a long way in assisting the stabilisation of these
workers, over the medium to long term, from a financial perspective.
Contract workers have been ignored for too long, and if the
economy is being propped up by a contract sector, then serious
thought must be given to the future of such contributors to
the national economy.
Barring a national policy, individuals will just have to educate
themselves to take the initiative.
So if you know someone in this situation, that person will
have a group of associates also in the same situation, and
they will need some help.
Let us as a concerned citizenry reach out to them in our communities.
As happened in Europe and Japan, failure to help them take
proactive measures will only mean higher taxes for the rest,
and less social security for those who actually contribute.
Your guess about the size of the work force involved in contract
work, whose pay envelopes escape NIS deductionsa basic
social security contribution is as good as mine.
How long will it take to clean up the compliance systems,
and hire the manpower to enforce equitable legal address,
is another guess. The simplification of the tax regime and
tax return data, announced in the last two budget speeches,
is a step in the right direction.
But, as the old saying goes, when your neighbours house
is on fire, wet yours. Continued next week.